Global AntiCorruption Laws and Trade Sanctions Jason Prince

Global Anti-Corruption Laws and Trade Sanctions Jason Prince

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Agenda 1. 2. 3. 4. 5. U. S. Foreign Corrupt Practices Act International Anti-Corruption Laws U. S. Trade Sanctions International Trade Sanctions Compliance Program Best Practices

Anti-Corruption Laws § Historical Context § Watergate Scandal § Church Committee § FCPA - 1977

FCPA Penalties Ø Criminal: • Companies = Up to $2, 000 per violation • Individuals = Up to $100, 000 per violation, or imprisonment of up to 5 years, or both Ø Civil: • Companies = Up to $100, 000 per violation • Individuals = Up to $10, 000 per violation

FCPA Penalties Top 10 Largest FCPA Enforcement Actions • • • Siemens AG (2008) Alstom (2014) KBR/Halliburton (2009) BAE Systems (2010) Total, S. A. (2013) Alcoa (2014) ENI/Snamprogetti (2010) Technip S. A. (2010) JGC Corp (2011) Daimler AG (2010) $800 million $772 million $579 million $400 million $398 million $384 million $365 million $338 million $219 million $185 million

TI Corruption Perceptions Index

FCPA Enforcement Authority Department of Justice • All criminal enforcements • All civil actions, except those against issuers Securities and • Only civil actions against Exchange issuers Commission

FCPA: Two Primary Components 1) Anti-bribery Provisions: Prohibit most bribery and non-routine payments to foreign government officials; and 2) Financial Record Keeping & Internal Control Provisions: Require specific records and financial internal controls to be maintained to provide reasonable assurance of accuracy of financial records and to demonstrate compliance.

FCPA Anti-Bribery Provisions

Anything of Value

Anything of Value • No de minimis or “small payment” exception under FCPA • Subjective standard

Foreign Officials

What About These Individuals?

Who Is a “Foreign Official” • Foreign governments and instrumentalities – State-Owned and State-Controlled Companies • • Public international organizations Foreign political parties, officials, or candidates Royal family members (fact specific) Any person, while knowing that all or a portion of thing of value will be promised or given to foreign official

Foreign Official - Knowledge A company has “knowledge” when it: • Knows that a bribe will be paid to a foreign official, or • Consciously disregards a high probability that a bribe will be paid to a foreign official.

Foreign Anti-Corruption OECD Convention on Combating Bribery of Foreign Laws Public Officials in International Business Transactions (“OECD Anti-Bribery Convention”): – Entered into force in February 1999 – 41 participating countries account for 80% of global exports • Includes: Canada, Brazil, Japan, Mexico, Russia, South Africa, United States • Excludes: China, India, Peru, Taiwan, Vietnam – Generally tracks FCPA, with a few exceptions

Foreign Anti-Corruption Laws Chinese Anti-Corruption Laws: – Prohibit giving and receiving of bribes and applies to public and private bribery – Amended on May 1, 2011 to expand prohibition on bribery of foreign officials – Growing enforcement activity

Trade Sanctions Laws • Summary - The Office of Foreign Assets Control (OFAC) is part of the U. S. Department of Treasury. It enforces U. S. economic sanctions against specific countries, as well against individuals and companies • Global Reach - OFAC also imposes restrictions on U. S. persons working globally and prevents these persons from facilitating or approving transactions that would be prohibited if performed in the United States

OFAC: Country Sanctions • OFAC administers U. S. trade sanctions on select countries • These sanctions bar or restrict trade activity by U. S. individuals or companies

OFAC: Country Sanctions § Main Embargoed Countries Iran Sudan Cuba Syria § Each embargo regime is different § Embargoes change as U. S. foreign policy evolves

OFAC: Country Sanctions Countries subject to OFAC targeted sanctions include: ♦ ♦ ♦ ♦ Balkans Belarus Myanmar (Burma) Cote d’Ivoire Democratic Republic of the Congo Iraq Lebanon ♦ ♦ ♦ ♦ Liberia Libya North Korea Russia Somalia Yemen Zimbabwe

• OFAC: Burma Sanctions Program (Burma) Example--Myanmar ♦ Targeted at blocked individuals and entities – U. S. entities cannot conduct business with these parties absent a license ♦ General license now authorizes importation of Burma-origin goods ♦ General licenses authorizing the export and re-export of financial services and new investment in Burma

OFAC: Prohibited Parties • U. S. Blocked Parties – OFAC maintains a regularly updated list of foreign individuals and companies with which U. S. parties are prohibited from conducting business ♦ Specially Designated Nationals List (“SDNL”) Individuals on the blocked party registers are frequently referred to as “Specially Designated Nationals” or “SDNs” ♦ Other lists are maintained by the U. S. Departments of Commerce and State

OFAC: Prohibited Parties • Rule - OFAC sanctions prohibit U. S. citizens, businesses, and financial institutions from engaging in business or financial transactions with persons or entities on the SDNL or other lists • Financial institutions are required to file reports with OFAC for: ♦ Blocked payments or transfers held at the financial institution ♦ Rejected transactions in which parties blocked by OFAC or listed on the SDNL have any interest • Reports must be filed within ten business days of the transaction

OFAC: Prohibited Parties • Screening - A company that is subject to OFAC jurisdiction must screen customers and third-party agents to identify and prevent possible transactions involving a proscribed party

OFAC: Penalties • Criminal Penalties (IEEPA) for violating most OFAC regulations range up to 20 years in prison, and up to $1, 000 in fines ♦ Cuban Sanctions (TWEA) – $1, 000 / $100, 000 • Civil Penalties (IEEPA) up to $250, 000 per violation ♦ Cuban Sanctions (TWEA) – $65, 000 • Transactions can be parsed to produce potentially multiple violations for each non-compliant transaction

• OFAC: Special Compliance Risks Non-listed Sanctioned Parties ♦ Parties with an interest (e. g. , ownership, control) in a blocked party ♦ Foreign ownership changes • Facilitation of a prohibited transaction ♦ Financing, legal/compliance support or counseling • Mandatory financial institution reporting (Suspicious Activity Reports) • Exceeding the scope of a General License or exemption

• International Trade Sanctions United Nations – Issued through U. N. Security Council • Canada – Key Differences with United States • Example—Exports to Belarus banned • Example—No Cuba embargo – Blocking Statute

Compliance Programs Written Policy & Training Due Diligence Compliance Documentatio n Compliance Monitoring

Written Policy & Training • Provision of regularly updated written policy – Appointment of Compliance Officer/Manager – Standard Guidelines for Anti-Corruption • Gifts, Meals, Entertainment, Product Promotion Events, Facilitating Payments, Foreign Political Contributions and Charitable Donations – Required Denied Party Screening • Periodic training of key employees and foreign agents

Due Diligence Background Checks: – U. S. Department of Commerce’s U. S. Commercial Service – U. S. Government’s Consolidated Screening List http: //export. gov/ecr/eg_main_023148. asp – High Risk: Additional due diligence and written due diligence report submitted every 1 -2 years

Due Diligence Red Flags: – Country or industry corruption – Refuses to certify compliance and/or rejects anti-corruption terms in proposed contract – Not qualified and/or lacks resources – Related to or referred by a government official – Heavy reliance on political or government contacts – Requests for strange payment terms or arrangements – Vague payment descriptions – Over-invoicing or false invoices – Unrecorded accounts or transactions – History of bribery allegations or investigations – Lacks code of conduct or anti-corruption program

Compliance Documentation • Contract Terms: – – Representations and covenants Certification obligation Right of termination Audit rights • Written Procedural Documents and Certifications

Compliance Monitoring • Compliance Monitoring: – Periodic Certifications: • Employees, Directors & Officers • Foreign Agents – Whistleblower Procedures: • Immediate reporting to Compliance Officer • Strict prohibition on retaliating against anyone for raising or helping to address anti-bribery issues – Periodic Audits

Questions? Jason Prince jeprince@hollandhart. com 208 -383 -3919